The greatest show on reinsurance earth

While you're able to get to place to place in Bermuda by foot, Dubai travel requires a taxi through building project after building project - the most breathtaking being the construction of the Burj Dubai, the world's tallest building. At the time of writing, the tower is already nearly 160 floors high, and it's still rising. Breathtaking simply doesn't cover the building's majesty.

Day one

Former top UK government minister and Hong Kong governor Chris Patten takes the stage at the World Insurance Forum (WIF), and then delivers an icy cold speech, revealing his two biggest worries: climate change and a possible slide into US protectionism.

"Climate change is a bigger risk than terrorism," he told the perspiring audience. In this heat, we can't help but agree. He adds that the United Nations Copenhagen Climate Change Conference in 1999 needs to "show resolution". Isn't that something we've heard about every climate change conference since Kyoto?

Patten's not exactly complimentary about having the Democratic party as the next US government. He fears, like many, that if the Democrats are voted into the White House - as they look increasingly likely to be - then protectionism will take over and their government will be a "great danger to the world economy."

Government-owned Gulf Insurance Cooperation and Bermudian major Arch are next on the podium, announcing the formation of their new joint venture, Gulf Re. Both sides are investing $200m into the $400m company, which will be led by former Chubb executive Gail Nordstrom. It will target the oil, gas, industrial, utility and transportation risks in the six member states of the Gulf Corporation council - Bahrain, Kuwait, Oman, Qatar and the UAE - writing aviation, energy, commercial transportation, marine, engineered risks and property lines of a business. "I knew it was a hot announcement but not this hot," says Arch CEO Iordanou Constantine, wiping sweat off his brow.

The humidity in the dome mixed with the hot and somewhat dusty atmosphere outside, as the construction site that is Dubai seems to link in nicely with futurist James Martin's talk: climate change. Although he doesn't paint the most wonderful picture of the world at present, there is hope, which comes in the form of technology. According to Martin, carbon nanotubes (cylindrical carbon molecules have novel properties that make them potentially useful in many applications in nanotechnology, electronics, optics and other fields of materials science) pebble bed power (a new, more efficient, safer version of nuclear power) and nuclear fusion will provide some of the stepping stones to the future, which might just make life easier. But, for now, Reinsurance thinks, the four horsemen of the apocalypse are just around the corner and Death is sharpening his scythe.

And speaking of Death's great friend, War, Tim Spicer, managing director of security solutions firm Aegis Defence Services, ends the day by speaking to the conference about the risks of terrorism in today's world.

After it's all over, the crowd relaxes with a couple of well-earned beverages on the balcony overlooking Dubai's version of the Arc De Triomphe, taking in the evening sun and quietly thanking God that they do reinsurance for a job.

Day two

After working off the effects of yesterday's after-seminar beverage offerings and a nice dinner to boot at the delightful Qamardeen Hotel in Dubai under the considerable shadow of the unfinished tower of the Burj, we're back for the second helping of WIF.

And what a second helping it was, with the panel from insurance heaven - Martin Sullivan, CEO of AIG, Swiss Re CEO Jacques Aigrain, Aon CEO Greg Case, Brian O'Hara, the outgoing CEO of XL Capital, and Lord Levene, the chairman of Lloyd's.

Lord Levene gently reminded Reinsurance on his way out of the DIFC last night that he hasn't been made Lloyd's chairman for a third straight - it's still going through review by the UK Parliament, apparently.

And thankfully for everyone in the room, it's a little cooler now - evidently the WIF organisers have dealt with the 'boiler room' issue of day one.

All of the CEOs - Levene excepted - have been hit by the problems in the subprime market.

Just before the WIF, AIG announced that it wrote down $11.47bn in subprime-related losses. Swiss Re reported in the first quarter of 2008 Swiss Re reported further structured credit default swap mark-to-market losses of 240m Swiss francs to add to the 1.2bn loss it reported in November. As for XL Capital, it declared a $1.5bn credit-related loss for the fourth quarter of 2007, and there are well-documented problems at mononline insurer SCA. Only Aon and Lloyd's seemed to be clear of the issues currently plaguing the market.

But unlike Northern Rock - the UK's biggest casualty of the banking disaster - no one will bail out the insurers if the losses keep stacking up. "There is no lender of last resort," says Aigrain. "We are self-dependent."

He adds his word of warning to the regulators: "Don't build a car with airbags and seatbelts but not have the car keys to put the thing in drive." In other words, if you don't allow firms to take some risks you won't be able to make any profit.

Reinsurance asks if someone should take the ratings agencies to task over this multi-billion dollar disaster. There are feelings within both the financial and insurance markets that Fitch, Standard and Poor's, Moody's and Company should perhaps have been a little more cautious before giving 'A' ratings to complicated investment objects without truly analysing each and every one of them.

"The accuracy of the ratings agencies correlates directly to those of the forecasters of hurricanes," snorts Lord Levene - a comment that lightens the dark air in the room. He's also asked why he's letting more capacity into the London market, to which he remarks: "If we do not allow the capacity in we will fall foul of competition authorities. We will simply try and get it under control. There is always someone who tries to buck the underwriting trends and be more clever but they aren't."

As everyone files out of the room to attempt to gladhand these five insurance gods, Reinsurance quizzes three of them about their sporting allegiances. After all, it might well prove to be a light relief from the world of subprime and the softening insurance cycle. Greg Case? Chicago Cubs baseball fan. O'Hara? Philadelphia Phillies. Martin Sullivan? Tottenham Hotspur - although he's very pleased with how the tie-in between AIG and a small football club called Manchester United is progressing. I'm also told that Grahame Chilton and XL's COO Henry Keeling share his views on football. Sources inform me that Levene's also big Chelsea fan. I avoid the question with Aigrain ... answers on a postcard please?

Reinsurance sneaks off to spend the afternoon in private meetings. After the day ended, all invited delegates were driven through the desert to an Arabian-style dinner, complete with local bands, a horse show over dunes, and belly dancing.

Day three

Poor Mr Ferguson has to get back to hit the ski slopes, so his editor takes over from here:

The final conference day saw the morning session focusing on regional business opportunities in the Far East, and the Middle East as described by local market practitioners. Then after an international regulatory session headed into a weighty panel discussion in the afternoon in which major (re)insurance leaders from Western markets explained how they would be taking advantage of these opportunities as they presented themselves.

Opening the day, Nasser Al Shaali, chief executive of the Dubai International Financial Centre, said that people often asked him why the Gulf region would need two or three financial centres - and said he always responded that it was for the same reason that Europe needed 30. Al Shaali then whetted delegates' appetites by explaining that there was approximately $1.5tn in project finance deals up for grabs in the GCC region alone.

The first session focused on the Asian and far eastern markets, with factual descriptions of the Indian, Chinese, Japanese, and Malaysian markets by local experts in each field. Of most note was a frank description of what Dr HaoMing Zhou of Royal and Sun Alliance described as THE market - China. While the middle kingdom should be the sixth-largest market in the world by 2010, it is ultra competitive and dominated by three main incumbent players and foreigners can only own 50% of Life companies and are cannot write motor. It appears that specialist niches within P&C are the foreigners' best bet for success at present.

It also emerged that the lesson from the experience of Japan over the past 18 years would appear to be that patience is a virtue worth learning. The country's slow and painful financial restructuring is only now finally bearing fruit in the form of foreign access and ownership.

The next session was lively and enlightening. It really is early days for the markets of the Middle East and North Africa. Panellists explained that local markets are fragmented and full of an excessive number of overly small local players. Panellists also lamented that even in the culturally homogenous GCC area there is no single market for insurance, which is probably preventing the formation of medium and larger regional players via merger and acquisition. There is no danger of this region going global in insurance terms, explained, Wasef Jabseh, chief executive of International General Insurance company.

However, the flipside is that insurance penetration is so low that growth rates are set to be explosive for decades to come.

After a regulatory session that saw a common sense approach to the eventual globalisation of reinsurance regulation espoused by Yoshi Kawai, secretary general of the IAIS, and applauded by fellow panellists and delegates alike, it was time for the big hitters to take the stage.

And we were in for quite a treat - Henry Keeling, chief operating officer of XL Capital, Stephen Catlin, chief executive of Catlin Group, Grahame Chilton, chief executive of Benfield, Neill Currie, chief executive of RenaissanceRe, and Mark Byrne, chairman of Flagstone Re, all outlined their companies' varying global strategies with relaxed eloquence.

But, once the open debate started, it wasn't long before differing management styles emerged. For example, relative reinsurance new boy Mark Byrne sought to bring his capital markets style to underwriting management. "Being both the client guy and the decision guy is a conflict of interest", he said and advocated a separation of powers between technical analysis, underwriting decision making and production.

Immediately Neill Currie disagreed, arguing that his clients preferred having a point of contact who they knew was responsible for making decisions and give them answers on the spot.

However, all did agree that a model for worldwide regulation was the way to go, with Grahame Chilton particularly vocal in calling for a global system of mutual recognition that would allow firms to passport in from other jurisdictions.

And with that it was time to pack up shop for another two years. The word was, technical difficulties aside, the organisers were so pleased with the overall response to relocating the forum to Dubai that a move further east may be on the cards next time.

Singapore anyone? One thing's for sure, wherever, whenever, we'll be back - conferences don't get much better than this.